Confusion over business property relief for some farmers

Date: 23rd July 2008

Some farmers letting land under grass keep arrangements might be denied full capital gains tax allowances, accountants have warned.

Tax experts from Old Mill Rural Services explained that there is now uncertainty about whether land that has a 'hope value' above its agricultural value still qualifies for business property relief (BPR).

In an interview with Farming UK, accountant Mike Butler explained that the problem emerged after the decision in the HM Revenue & Customs (HMRC) v McClean court case.

The case centred on a landowner who had let land with a high hope value on a grass keep basis.

"The tax rules have not changed at all but the interpretation of those rules is in the spotlight," Mr Butler explained to the publication.

"Even though the landowner had arranged for certain maintenance matters to be dealt with in-hand, including hedge cutting, fencing and ditching, the special commissioners decided that letting land on a grass keep arrangement was not akin to running a business, and therefore did not qualify for BPR."

Recently, the Chartered Institute of Taxation urged the government to carefully assess the implications for small businesses of any new tax reforms.